Minimum wage debate a battle of ideologies

Sunday

Dec 15, 2013 at 6:00 AM

By Lonnie Shekhtman CORRESPONDENT

WORCESTER — Long-time Worcester restaurateur Robb Ahlquist owns three popular restaurants, employing 300 people. He's nervously waiting as a bill calling for a major hike to the minimum wage makes its way through the Statehouse. Mr. Ahlquist has already calculated that he will have to pay his workers at least $600,000 more, per year, if the governor signs the bill into law next year.

This hefty rise in the cost of doing business will force him to make a decision no business wants to make: Whether to decrease staff, and thus, quality of service; or raise prices, and potentially lose customers.

The current version of the bill, approved by an overwhelming majority of the Senate last month, proposes to raise the minimum wage in the state from $8 an hour to $9 on July 1; $10 on July 1, 2015; and $11 on July 1, 2016. After that, it will automatically be adjusted every year to account for increases in the cost of living.

The proposed hike would leave Massachusetts, currently No. 8 in the country, paying the highest minimum wage in the nation.

It would also affect roughly 10 percent of Mr. Ahlquist's employees, he says, mostly the kitchen staff. But 30 percent of his employees, the servers, will be affected by another proposal in the bill to raise wages for tipped workers from $2.63 per hour to half of whatever the minimum wage will be.

This would be the first increase here in the wage for tip earners — waiters, hairdressers and some hotel workers — since 1999. Right now, Massachusetts has the lowest tipped wage rate in New England.

Mr. Ahlquist, who owns The Sole Proprietor, VIA Italian Table and One Eleven Chop House, said his servers already earn $20 an hour, including tips.

"To take care of the minimum wage people, I understand that and am sympathetic," he said. "But service people, that's hard. That's a real challenge for businesses like restaurants that are really labor intensive."

Too bad, say low-wage workers and labor advocates. And in a timeless ideological debate over free versus regulated markets, the fight between business and labor continues.

"Here's the empirical fact," explained Susan Moir, director of the Labor Resource Center at the University of Massachusetts at Boston, which trains labor organizers. "In an era where wages have been flat, income and wealth inequality has dramatically increased. The economic, social and political argument is do we want to live in a society where the trend is increasing inequality in income and health?"

The issue of growing economic inequality in the country has gained significant traction nationally in recent years, first with the Occupy movement, and then with the highly publicized protests by workers demanding higher wages at Wal-Mart, McDonalds and other chain retail stores across the country.

This activity has been part of the impetus for pending national legislation proposing to raise the federal minimum wage from $7.25 to $10.10 an hour.

According to the Massachusetts Budget and Policy Center, an independent research organization backed in part by several labor unions, the value of the state's minimum wage rate, based on increases in the cost of living, has declined by 25 percent since its peak in 1968, when it was at $10.72 in today's dollars.

A minimum-wage worker in Massachusetts today earns $16,000 per year, which is right on the poverty line for a family of two, and $5,400 less than he or she would earn at the 1968 value.

In the meantime, wages for the top 20 percent of workers have been steadily climbing for decades, and for the average-wage worker have been fairly flat, according to U.S. Department of Labor statistics compiled by the budget and policy center.

For Sam Rosario, president of Liberty Construction Inc. in Worcester, the issue is not that he would have to pay his 21 employees more. They already earn more than the minimum wage on his roofing and masonry jobs.

"No one is going to work $8 an hour working on a roof," he said. "What I fear is that my workers will say, 'Why would I work for you, picking off shingles for $13, if I can work for McDonalds for $11?' I think prices overall will go up, indirectly."

If the minimum wage hike goes through, the center estimates that 17 percent of the state workforce, or 485,000 workers — 21,000 in Worcester — currently earning between $8 and $11, will see their pay increase. These low-wage earners includes 63 percent of people who are unmarried with no kids, 86 percent who are older than 20 years and 28 percent with some college education, according to the budget and policy center.

Of course, those who earn in excess of $11 an hour will also see their pay go up, since the wage floor will rise for everyone, so people earning $11 an hour today will have to get bumped up to remain above the new entry level rate. Employers will also have to pay more for insurance that's based on salaries, such as workers' compensation and unemployment.

Since many employers in the state already pay more than the minimum wage, it is not surprising that the business community, particularly small businesses, largely opposes the proposed hikes.

Jack Mozloom, a spokesman for the National Federation of Independent Business, said that according to a poll of the organization's 7,000 members in the state, 90 percent oppose the hike. A majority of NFIB members have 20 employers or fewer.

Business owners argue today, much like they did more than a 100 years go leading up to the establishment of the nation's first minimum wage here in 1912, that they can't swing higher labor costs at a time when business is flat and costs in health care, unemployment insurance and energy are rising.

If they have to pay more, they say, they'll be forced to cut jobs, which won't bode well for the state's unemployment rate of 7.2 percent, up from 4.8 percent in January 2006.

The NFIB estimates that about 62,000 jobs will be lost over a decade if the hike goes through, half of them in the small business sector.

"Any time someone tells me they're going to decrease the number of jobs, that worries me," said state Sen. Richard T. Moore, D-Uxbridge, one of only seven senators, out of 39 voting, to vote against the wage hike. He favors an increase, he said, if it comes with other reforms that will cut other costs for businesses, such as unemployment insurance.

Proponents of the wage increase contend that increasing the minimum wage will actually help businesses, because it will give more people power to spend. It will also lead to happier workers, they say, saving businesses money in the long term by reducing their turnover rates and raising productivity.

Although both sides of the debate point at reliable studies that back their causes, economists don't agree on whether the minimum wage has an effect on employment. There are also conflicting research results on whether the minimum wage helps lift people out of poverty.